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The shape of the European banking supervisor is becoming clearer, with European finance ministers yesterday approving a number of measures to secure agreement on how it should look. Financial News pulls out the most important features.

• Limits to supervisory powers
The text announced yesterday allays concerns that the Single Supervisory Mechanism would bite off more than it could chew and have supervisory powers unacceptable to some EU member states. The ECB will only supervise banks with assets worth more than €30bn or at least a fifth of their country’s gross domestic product. EU Commissioner Michel Barnier said this means only around 200 banks will come under the Bank’s direct supervision, out of about 6,000 European banks.

• 'Double majority' voting
Non-euro area member states will receive a separate vote on decisions made by the European Banking Authority. The “double majority” clause is designed to prevent countries subscribing to the supervisory mechanism from dominating the EBA’s board of supervisors, although this measure will be revisited if fewer than five EU members stay out of the banking union.

• Opt-in for non-euro nations
Countries outside of the 17-strong currency union, and therefore not automatically part of the banking union, can voluntarily opt into the supervisory mechanism. While the rights of countries not choosing to do so are protected by double majority voting, the prospect remains of a “two-speed” Europe, split between core countries and more eurosceptic member states outside the currency union.

• Bank bailouts
The EU’s sovereign bailout fund, the European Stability Mechanism, will be able to recapitalise struggling banks directly. An operational framework for the entire banking union is due by the end of March next year, a full year before implementation is expected, by which time the ESM will have the power to recapitalise banks directly. Agreement has yet to be reached on whether or not the ESM will shoulder the burden of existing bailout packages.

• Avoiding conflict
The ECB’s twin roles, in charge of monetary policy and bank supervision, are to be kept strictly separate to prevent the interests of responsible supervision colliding with those of its current purpose as a central bank. A separate supervisory board is therefore to be set up within the ECB.